Reg A+ IPO – Learning Curve – Podcast

Dennis McCarthy – – (213) 222-8260

[Mara 1:]  Welcome, I’m Mara Schmid, CEO of reAgency Marketing.  Today, we’re going to be discussing the Reg A+ IPO, a new way for private companies to go public.

Our guest today is Dennis McCarthy, a Managing Director with Boustead Securities, which has successfully completed Reg A+ IPOs.  Welcome, Dennis.

[Dennis 1:] Thank you, Mara.

[Mara 2:] We’re here to talk about Reg A+ IPO because it’s a new way for private companies to go public but it’s still relatively unknown.  Give us a little history on Reg A+ IPOs and Boustead’s experience.

[Dennis 2:] Yes, Reg A+ is new.  The very first Reg A+ offering was completed in March 2016.  It wasn’t a Boustead deal but it raised approximately $17 million for a vehicle development company.

Since then, Boustead has been watching and learning from the experience of early deals, what’s worked well or not, in our opinion.

In June 2017, Boustead led a syndicate in raising approximately $14 million for Adomani, an electric vehicle company which was the first Reg A+ IPO to be listed on NASDAQ.

Then in January 2018, Boustead led a syndicate in raising approximately C$10 million for True Leaf, which sells pet food supplements.  True Leaf was the first Canadian-listed company to complete a Reg A+ offering in the US.

Boustead also has a couple other Reg A+ offerings in progress.  Several of these offerings are for real estate businesses which are aimed to give investors a consistent cash dividend.

[Mara 3:] When we were talking before we went on the air, you mentioned that Boustead, and for that matter, much of Wall Street, are on a steep learning curve on Reg A+ offerings.  Would you elaborate?

[Dennis 3:] Yes, certainly.

[Mara 4:] You mentioned a couple topics, like offering marketing.

  1. Offering Marketing

[Dennis 4:] Yes, unlike a traditional S-1 offering, a Reg A+ offering can use a wide range of marketing techniques, email, social media ads, broadcast, influencers, etc.

Boustead and its media partners work with our clients to actively spread the word of the offering.

We try to use client’s resources whenever possible but we’ve also developed resources specifically for these Reg A+ offerings and we get a good response.

[Mara 5:]  Next, you said companies need support from current shareholders.

  1. Support from Friends of the Company

[Dennis 5:] It’s no surprise that new investors want to see that current investors and other friends of the company put the first money into an offering.  With support from friends of the company, new investors seem more comfortable participating in the offering.

[Mara 6:] What about listing on NASDAQ or the NYSE?

  1. Listing on NASDAQ or NYSE

[Dennis 6:] We’ve found that investors prefer offerings where the company has obtained a conditional listing from NASDAQ or the NYSE.

With the conditional listing, investors know that a company has to meet the listing requirements including the threshold share price and market value.

Also, brokerage firms are more likely to take the company’s stock into a brokerage account if the shares are on NASDAQ or the NYSE which generally makes that process easier and faster for an investor.

[Mara 7:] Then there’s your FlashFunders platform?

  1. FlashFunders Platform

[Dennis 7:] Boustead realized the value of a partner which would enable Boustead to offer a seamless marketing and offering paperwork process.  Boustead merged with FlashFunders under one umbrella organization.

A Reg A+ offering has a number of elements so having most of them under one organization increases coordination.

[Mara 8:] Thank you for these insights.  Tell us if someone has questions or wants to discuss a Reg A+ offering further, how can they learn more?

[Dennis 8:]  We’re happy to answer questions. I’ll post several contact emails of the Boustead team that can help.

Dan McClory –

Keith Moore –

Robert Maley –

Dennis McCarthy –

Leveling the IPO Playing Field

Leveling the IPO Playing Field

The Securities and Exchange Commission (SEC) is considering permitting private companies of all sizes to confidentially “test the waters” with potential investors before embarking on the initial public offering (IPO) process, according to The Wall Street Journal (link).

This is not a surprise given the other signs that the SEC appears to be trying to level the procedural playing field among companies using different forms of registration.

For example, the SEC announced last June that it permits companies of all sizes to use confidential filing, not just those companies which are subject to the new JOBS Act rules (Click to read article).

Boustead has found, in conversations with the SEC about specific offerings, that the SEC is attuned to the advantages afforded companies using the new forms of registration.

“While the rules are still the rules, we’ve seen an effort by the SEC to work with our clients to reduce some of the differences between forms of SEC registration, where possible.” said Keith Moore, CEO and Founder of Boustead Securities, LLC. a broker-dealer working with clients using Reg A+ and traditional forms of SEC registration.

Given this trend, the rules currently available to companies using the new JOBS Act rules, such as Regulation A, dubbed Reg A+, may eventually be afforded to companies using other forms of SEC registration.

Until then, a private company contemplating an IPO should at least consider using Reg A+ among its options.

For more on Boustead’s experience using Reg A+ for IPOs, click here.

Embedding Image Links Now Copyright Infringement?

Infringing Image? - Credit


In this internet age, a court decision has called into question a relatively common method of referencing other articles or images.

Until this new court case, internet publishers and bloggers have relied on a case, Perfect 10, Inc. v. Inc. (“Perfect 10”), which created a bright line test to determine when the reuse of an image from another website was considered copyright infringement.

The test in Perfect 10 centered on whether a website re-using another website’s image in an article either: (i) supplied the image to a reader’s browser from its own server (i.e., infringing); or (ii) simply embedded a link to the image so the image would be obtained from the original source website (i.e., non-infringing).

A new case, Goldman v. Breitbart News Network, LLC (“Goldman”), in the Southern District of New York in February 2018 calls into question this distinction.

In the Goldman case,  the court held that a website displaying an image whether from its own server or via an embedded link from the original source would be considered an infringement.

This new case may prompt additional copyright infringement suits before the question is settled.  Until then, a website relying on the Perfect 10 bright line test of embedding a link to an image does so at its own peril.

As an active website content generator, in most cases, I personally don’t object to other websites referencing and embedding my content as long as the material is clearly attributed to me.

Only rarely does the re-use of my content cross the line where there’s no proper attribution.

To read more about this issue, please click here, to go to a background article on Technology Law Dispatch.

5 Common Website Mistakes of Microcap Public Companies

Adam Epstein, a former microcap institutional investor, shares his list of common failings of microcap public company websites.  In his experience, these failings dissuade investors, a costly problem.

Adam is a frequent speaker at microcap conferences.  This webinar is well-organized and well worth the few minutes investment by company executives and service providers.

Click here to go to the webinar page.

Dangerous Delay

Dennis McCarthy – – (213) 222-8260

My colleagues and I at Boustead noticed what may be a dangerous trend among microcap public companies.

When we suggest that microcap public company management should take advantage of the favorable stock market environment to raise some capital, many microcap CEOs and CFO’ tell us they want to wait before raising capital.

Wait for what?

  1. Wait for a Higher Stock Price?

In general, microcap valuations are relatively high now according to an index maintained by LD Micro, the well-respected independent resource.

To quote LD Micro’s September 17, 2017 email  – “After several attempts and a few close calls, the LD Micro Index finally hit an all-time high on Friday.”

Microcap stock prices might rise to yet newer highs, but there’s no certainty.

  1. Wait for Projected Performance Improvement?

We know that company management is often optimistic about a company’s future performance.

Plus, wouldn’t having more capital actually help management to achieve the performance improvement?

  1. Wait Until the Capital Need is Urgent?

Capital is not always available for microcap companies.

We’ve experienced periods, sometimes long periods, when microcap companies can’t access capital at any reasonable price.

Also, raising capital can take longer than expected, even when it is available.

Take Capital When Available

Our Advice is Take Capital When It’s Available

For those who are optimists, waiting for a higher stock price, think of it as averaging up.

For those who’ve lived through periods when capital wasn’t available to microcap companies, recall the anxiety and avoid it this time.

As the Saying Goes “Get Your Umbrella Before the Rain Starts”

It’s ironic but capital is most available when not needed.

Companies raising capital now may have more alternatives, so they can choose an attractive structure.

Microcap Funds Have Capital

At Microcap Funds, Money Is Burning a Hole in Their Pocket

As I noted above, recently, microcap funds have had good performance and fundraising has been productive.

Microcap funds have capital to invest and pressure to put it to work.

Microcap funds typically aren’t very large.  Fund managers want to deploy their capital and then raise another fund.

Investor Preferences

I would note a good development for both managers and microcap companies, many of the new funds permit their fund managers greater flexibility regarding investment structure.

In another article, I’ll discuss those features which seem to be most appealing to microcap public investors.

Consider these when preparing for a financing.

Please contact me to discuss your capital market goals. 

Financing Season

Dennis McCarthy – – (213) 222-8260

During this financing season, my colleagues and I are active assisting our clients with a number of financing projects.

We’re raising private capital, arranging debt and organizing public offerings.

This is a great time of year for a company to be in the capital markets.

Investors and lenders are ready to focus and make decisions before year end.

Here are some ideas where investment capital is available now.

Cash Flow Investments

Many investors prefer businesses or projects which give them a current return, like a dividend, often with some equity upside.

We know lots of investors ready to invest to get a current return.

Click the link below to view a video on that capital source.

Growth Capital

Growth capital is available for companies which are past the venture capital stage but not yet mature enough for classic private equity.

Growth capital, in either debt or equity, can help your company to accelerate its growth.

Click the links below to view  videos explaining more about growth capital.

Public Offerings

The public offering market is available too.

One of my current projects involves a traditional registered public offering.

Others at Boustead have raised capital using the newly revised “Reg A+” public offering.

Click the link below to view an interview of my colleague, Dan McClory, about one of our recent Reg A+ offerings.

Whichever form of public offering, we’re finding investor demand for attractive companies.


So, the bottom line is, this is a good season to consider raising capital in a variety of forms.

Please contact me to discuss your goals.

Expansion of Private Financing Sources

We, at Boustead, see a trend of big investors and company buyers, including pension funds, family offices and wealthy individuals, choosing to make direct investments in companies and projects rather than invest through intermediaries like hedge funds and private equity groups.

Boustead’s professionals talk with investors and acquirers daily which gives us a good sense of this trend.

In fact, we posted an article in early 2016 describing that in response to this trend and in order to get the best deal for our clients, we regularly reach out to a broader universe of potential investors and buyers including those pension funds, family offices and wealthy individuals.

It caught my attention, therefore, when Axial, the huge online deal source database, reported that it too has seen the direct investment trend and described several driving forces which are likely to continue the trend (click here).

Axial’s three driving forces are:

  1. Greater private company information availability which diminishes the value of deal intermediaries’ famed proprietary deal networks.
  2. Greater capital source information availability due to online resources such as Axial.
  3. Reported “fee fatique” which may simply be a reaction to lower returns generated by hedge funds and private equity funds. I wonder, if returns were strong, would there be fee fatigue?

Neither Boustead nor Axial is forecasting the end of hedge funds and private equity groups.  Rather, the trend signals that there are more funding and sale options available. For companies looking for capital or for a buyer, and for their investment bankers, that’s good news.

Please contact me to discuss any capital market project whether raising capital, equity or debt, or M&A.  Thank you.

Cash Flow Deal Funding Gap

Dennis McCarthy – – 213-222-8260

In prior articles, I’ve highlighted investor’s strong demand for current cash flow deals.

Many investors want to get a good portion of their return along the way and don’t want their whole return at risk for the future.

In today’s financial market, that makes sense.  Who knows what economic environment we’ll face in the next 5 years, not to mention further into the future.

So, capital is flowing into funds providing current returns, like infrastructure, energy, alternative energy, real assets, mezzanine and similar funds.

This capital inflow is generally good for bankers like me with projects seeking capital.

The problem, however, is that with so much capital flowing into funds, funds have grown to be enormous. These enormous funds look to invest in projects requiring large amounts of capital.

Ironically, with all that capital flowing into funds looking for a current return, there’s a funding gap for smaller projects and companies.

For example, we’re in the market with a renewable energy project with a total capital budget north of $350 million.  That amounts gets attention.

The project, however, has attracted strong interest from lenders so the actual equity check required is only 10-15% of the capital budget.

Sounds good, doesn’t it.  The problem is that many funds find a project requiring less than $50 million of equity to be too small. For many funds, under $100 million is too small.

Fortunately for our client, and us, some funds will consider smaller equity investments, preferring to avoid the intense competition for large deals.

I believe that when we look back in 5 to 10 years, smaller equity check deals, under $100 million, will have provided a better return than that of the huge deals.  Time will tell.

If your fund will consider a project where the equity check is smaller, please contact us.  We have attractive projects and would like to get to know just what type of project fits your fund.

Also, if you have a cash flow project, please contact us to discuss your capital market plans.

Investor Demand for Cash Flow Deals

Every day, I talk with institutional investors about deals.  Institutional investors have capital which they need to invest. So, what do I hear from these investors?  What are they looking for?

Today, many tell me they want predictable quarterly cash returns.

Some want fixed payments, something in a debt instrument.

Many, however, will accept some variability in the payments. they’ll take some equity risk, to get a better return.

I’m seeing a large and growing universe of these investors.

If you can offer investors a generally predictable cash return, you can get investment capital.

Naturally, institutional investors will ask what could go wrong to diminish their cash return. The better your answer, the stronger the investor demand and the lower your required payments.

Also, if your investment has underlying assets, like real estate or equipment that can be sold to raise capital in a pinch, this also makes your investment more attractive.

So, if you’re raising capital for an investment that generates strong cash flows, consider using those cash flows to pay investors a periodic cash return. 

I recognize that if you pay out the cash flow to investors which you need to reinvest for growth, you’ll have to raise more capital.

The good news is that if you’ve gained a track record for paying investors their periodic cash return as promised, you’ll have no trouble raising capital at attractive terms.

Please contact me to discuss your capital market goals. Thank you.

Dennis McCarthy

Dennis McCarthy

Court Criticizes Legal “Racket”

A well-regarded Jurist in the Seventh Circuit issued a ruling which was highly critical of a legal practice (called a “racket”) in which in response to a large public corporation’s filing with the SEC for a strategic transaction, one or more plaintiff’s counsel file suit to challenge the adequacy of document disclosure. Rather than fight the suit, many corporations simply settle paying plaintiff’s counsel a handsome fee while making no substantive modification to the SEC documents in question.

For background, when Wallgreens issued a proxy statement to request a vote to reorganize after its combination with Boots, the UK pharmacy chain, Walgreens was sued for a failure of disclosure.

The court noted that such suits are commonplace because, in recent years, 95% of strategic transactions for public companies with market values over $100 million receive such challenges.

In Wallgreen’s case, the Court responded to what appears a simple payoff to plaintiffs’ counsel who received $370,000 for its one month suit. Walgreens put up no resistance. The Jurist stated that the value of the supplemental disclosure added to the proxy “appears to have been nil”.

The Jurist concluded, “[t]he type of class action illustrated by this case — the class action that yields fees for class counsel and nothing for the class — is no better than a racket.”

Corporations and plaintiffs’ counsel are now on notice that the Seventh Circuit will review settlement cases carefully.

For a good explanation of the practice and the ruling in the Walgreen’s case, please read Sheppard Mullin’s article in its Corporate & Securities Law Blog (click here).

Please contact Monarch Bay to discuss your company’s capital market goals.